Why Joby Aviation's Move Into Defense Is a Bullish Sign for Investors
Key Points
Joby's stock has fallen more than 50% in the past 12 months.
Resonant reported more than $100 million in revenue last year.
Joby Aviation (NYSE: JOBY) is moving deeper into the defense sector. The electric air taxi maker announced plans to acquire defense-tech company Resonant Sciences for $500 million.
The news caused a short-term drop in the stock as investors weighed the cost against the longer-term opportunity. Ultimately, this move is good for investors, as Joby diversifies its offerings and enters a more lucrative, profitable space.
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The deal gives Joby an established presence and credibility within the defense sector. Resonant generated more than $100 million in revenue in the past 12 months. Its 40% year-over-year revenue growth is substantial for Joby, which has already used acquisitions to generate revenue.
Last year, Joby acquired Blade for $125 million. Blade accounts for more than 90% of Joby's current revenue.
The deal also allows Resonant to become Joby's dedicated defense business, and Joby will remain focused on its commercial air taxi pursuits. The integration of the two companies' technologies will also boost capabilities, particularly within autonomous defense systems, which is expected to be a highly lucrative market. Air taxis face intense regulatory scrutiny and hurdles, with mass adoption likely still years away.
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Joby's move into defense is expensive in the immediate term, but, more importantly, it diversifies its revenue. The $500 million deal, which is structured as $450 million in cash and $50 million in common stock, will be well worth it as Resonant continues to sign new contracts. The short-term drop in stock price looks more like an opportunity than a warning.
I'm bullish on this acquisition. Joby's stock has fallen more than 50% in the past 12 months and is quite volatile. Investors should anticipate that volatility will remain as the air taxi industry is still in its nascent stage. This moment presents an intriguing time to get in on the future of aviation.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.